Budget Battles Delay New Hawaiian Subsidiary

While the U.S. government shutdown may be over, Washington budget squabbles are continuing to disrupt airline business plans. Hawaiian Airlines is a prime example, with the FAA saying it does not have the resources to perform the certification work needed for the airline to launch its new turboprop subsidiary.

Hawaiian has purchased three ATR 42s for its Ohana inter-island operation, but they are sitting idle as the airline waits for the FAA to act. The delay dates back about six months to the budget cuts related to the sequestration process. Hawaiian intended to launch Ohana during the 2013 summer season, but has been unable to do so.

This situation is “incredibly frustrating for us,” Hawaiian CEO Mark Dunkerley tells Aviation Week. “The strategic development of our business is being held hostage to the budget battles that are taking place.”

He went further during an earnings call with analysts, describing the delay as “completely unacceptable” and “woeful in every dimension.” So far, it is not costing Hawaiian much to keep Ohana in mothballs, although the airline is not able to recoup the investment it has made in the subsidiary. The FAA cannot even provide an estimate of when certification work may occur.

Dunkerley, in the Aviation Week interview, says that in planning the new subsidiary, Hawaiian sought the “most expeditious, least impactful” path from a regulatory perspective. “Considering the enormous contribution that airlines and our customers make to funding the provision of [government] services that we use, it's especially galling that we're in this situation.”

The carrier is “paying close attention to see if the strategic initiatives of other competitor airlines are likewise being held up, and if they are not, we will have some questions,” asserts Dunkerley. Up to now, Hawaiian has not seen any indication that other carriers are receiving more attention from the FAA, although he adds that “we will not hesitate to raise [this issue] if we do.”

Ohana is intended to fill a gap in Hawaiian's inter-island network by offering flights from Molokai and Lanai to Honolulu. The airline currently has no other turboprops in its fleet, and its smallest aircraft are its Boeing 717s.

The ATRs are owned by Hawaiian, although they will be operated under contract by Empire Airlines, which is primarily a cargo carrier. Since the ATRs will be operated under Empire's certificate, that carrier has to conduct proving runs for the FAA in Hawaii. Currently, the aircraft are at Empire's main base in Coeur d'Alene, Idaho. The first few ATRs were previously owned by Czech Airlines.

The FAA has said that once it gets a budget approved it can complete the certification, but it is impossible to gauge when that will be, says Hawaiian's Senior Vice President of Operations Charles Nardello. Once the carrier has a certification date, it will be able to spool up marketing for the service. But the uncertainty means it cannot sell tickets yet.

Hawaiian has indicated that it may build its turboprop fleet to as many as six aircraft. Nardello says the carrier will be assessing what other inter-island markets it might use these aircraft in. Due to the scope clause in the carrier's contract with its pilots, the ATRs essentially cannot be flown on the trunk routes between the islands that are flown by mainline aircraft.